Attack of the Monster Merger

That question has been asked almost daily by Wall Street and the business media since late 2006, when then-new CEO Jeffrey B. Kindler announced the death of torcetrapib, the company's would-be savior. The No. 1 pharmaceutical company with the best-selling drug in history—and the steepest patent cliff—has come to symbolize the "crisis" of the drug industry and its bankrupt blockbuster model.

Could this drug colossus fail? Just go under, like a glacier into the sea? Or like Lehman Brothers, GM, the state of California...

It's only fair to remember that Kindler, like President Obama, inherited the mess he faces. In a race against time, he has arguably made the right moves: ending the sales-force arms race, re-creating R&D as small business units, abandoning cardiology for oncology. He in-licensed and outsourced, cut back and closed down. "The expression I use here a lot is: 'the spirit of small, the power of scale,'" he told BusinessWeek last October. "It's continuous improvement, but we've made enormous progress."

Still, Kindler couldn't get a break. Exubera became a joke; Chantix, a rare breakthrough from Pfizer's own lab, made news less for its public health benefits than for the bizarre behavior of new users. "You want to know why everyone picks on Pfizer?" asks Decision Resources analyst Michael Latwis. "Because they spend the most money on R&D and have a string of failures to show for it." (Pfizer did succeed with Sutent, approved simultaneously for kidney and gastrointestinal tumor in 2006; it had sales of $850 million in 2008.)

"Pfizer is like a roach motel: drug candidates go into the lab but never come out," wrote an anonymous Pfizer employee, commenting on an article on the Forbes Web site in early January called "The Incredible Shrinking Pfizer." "Sadly, there are great scientists at Pfizer but no leadership."

Pfizer stock has lost 34 percent of its value since Kindler took over, compared with a drop of 20 percent for the Dow Jones Wilshire Pharmaceuticals Index. Scott Richter, a portfolio manager at Fifth Third Asset Management, dumped his Pfizer shares more than a year ago because the R&D wasn't performing. "Cost-cutting can help earnings in the short term, but it's not transformational," Richter says.

Then, on January 26, came the potentially transformational event: Kindler announced that Pfizer was acquiring Wyeth Pharmaceuticals for $68.103 billion.